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Credit Card EMI vs Personal Loan: Which Is Cheaper?
The quick answer: for a small purchase you'll clear quickly, a credit card EMI is convenient and fine. For a larger amount or a longer tenure, a personal loan is usually cheaper — its interest rate is lower, and, crucially, there's no 18% GST on the interest as there is with a card EMI. The card EMI's headline rate hides that GST and a processing fee, so its true cost is higher than it first appears. Always compare the total cost, not the advertised rate.
How they differ
- Interest rate — card EMIs run roughly 13–18%; personal loans roughly 10.5–24% depending on your profile, with strong borrowers at the lower end.
- GST — a card EMI adds 18% GST on the interest and the processing fee. A personal loan has no GST on interest.
- Tenure and size — card EMIs suit small amounts over 3–24 months; personal loans handle larger sums over 1–5 years.
- Speed — a card EMI is instant at checkout; a personal loan takes a little longer but gives cash you can use anywhere.
The hidden GST on card EMIs
This is the detail that flips many comparisons. On a card EMI, the bank charges 18% GST on the interest component of every instalment, plus GST on the processing fee. So a "16%" card EMI effectively costs more than 16%. A personal loan at the same 16% has no such GST on its interest, making it cheaper for the same rate and tenure.
A simple rule
For a one-off purchase under roughly ₹50,000 that you'll repay within a few months — or a genuine no-cost EMI — the card route is convenient and the cost difference is small. For anything larger, longer, or to consolidate existing dues, price a personal loan first; it usually wins once you count the GST and fees. And whatever you do, avoid letting the balance revolve on the card, where interest can run 36–45% a year.